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the extent it may create inferences regarding the existence of a
profit motive in the earlier years.” Hillman v. Commissioner,
T.C. Memo. 1999-255 (citing Hoyle v. Commissioner, T.C. Memo.
1994-592). “[A]ctual profits or losses in those and subsequent
years have probative, although not determinative, significance in
such evaluation.” Smith v. Commissioner, T.C. Memo. 1993-140.
The fact that the taxpayer carries on an activity in a
businesslike manner and maintains complete and accurate books and
records may indicate that the activity is engaged in for profit.
Sec. 1.183-2(b)(1), Income Tax Regs. Other indicia of a profit
objective include carrying on an activity in a manner
substantially similar to other activities of the same nature that
are profitable, changing operating methods, adopting new
techniques, or abandoning unprofitable methods in a manner
consistent with an intent to improve profitability. Id.
Gold mining and other similar speculative activities are
different from most other business activities because they
generally produce no significant income until a find is made, and
then the income is earned in one lump sum. In Harrison v.
Commissioner, T.C. Memo. 1996-509, this Court found that a
taxpayer’s contemporaneous handwritten lists of expenses were
sufficient records of his gold mining and treasure salvaging
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Last modified: May 25, 2011